Luc Rémont is trying to improve profitability at the recently renationalised nuclear power group
The French government and the chief executive it handpicked to run state-owned nuclear power group EDF have clashed over strategy and financing just as the country gears up for its biggest reactor construction programme in decades.
The state, which recently renationalised EDF, is at odds with boss Luc Rémont over some of his plans to try to make the group more profitable after his appointment a year ago, people close to the discussions said.
“It’s pretty tense,” one person familiar with the talks said.
In particular, a looming overhaul of the way nuclear power prices are regulated in France has created fractures as EDF seeks higher prices to bring in much-needed capital, while the state wants to contain energy costs for households and businesses as much as possible, the people added.
“For Rémont, electricity prices need to be sufficiently high so that the group can invest, and the government needs to have prices that are acceptable to consumers,” another person said.
At its core, the debate around EDF is an existential one — whether its executives can and should run the group as a normal company despite it being state-owned.
EDF has net debt of close to €65bn. The group’s finances have improved and it returned to profit in the first half of 2023, but Rémont has outlined annual spending needs of €25bn per year, higher than the €16bn-€17bn it used to budget for, and which he does not want to finance with more loans.
In July, Rémont, a former civil servant and executive at industrial group Schneider Electric, told a parliamentary hearing EDF was “still a company, and has to be able to function like one”.
“If this doesn’t work with Rémont it means it can’t work with anyone,” one banker in Paris said of the tensions between the government and EDF. “There’s always been this fiction that a company that belongs to the state is somehow not the state.”
The clashes have highlighted how France is struggling to move past the infighting that has long dogged the former monopoly, despite the government’s move to take 100 per cent control and appoint Rémont, to steer this new phase.
The talks over power prices are aimed at replacing a system known as Arenh, which expires at the end of 2025, under which EDF sells a chunk of its production to third-party distributors and industrial groups at a set price of €42 per megawatt hour. French wholesale electricity prices are still north of €100 per megawatt hour.
Any mechanism replacing the Arenh will need to get the green light from Brussels, at a time when the EU is also trying to agree on broader electricity market reforms. These have become bogged down in disagreements between France and Germany over nuclear power and whether or not the sector can qualify for certain subsidies.
Previously under 84 per cent government ownership, EDF has for years been gripped by state interventions which executives considered detrimental to the group.
This reached a head during Europe’s energy crisis in 2022 when EDF was made to foot the bill for caps on power prices for consumers, contributing to its record €17.9bn losses that year, though the group also faced criticism for its own failings after outages at its nuclear reactors.
Rémont’s appointment was meant to mark a move to a more coherent structure of full government ownership, so that EDF could deliver its biggest challenge of all: the construction of at least six new nuclear reactors in France, a €52bn programme underpinning the country’s low carbon strategy. The company is also behind major nuclear projects elsewhere, including in Britain.
Rémont is now unlikely in the short term to present the full-blown strategy plan he had been expected to unveil in public by this summer, people familiar with the matter said.
Instead he has been testing the water with several proposals, including a more market-based vision for how EDF could restore its margins that is at odds with the state’s plan to regulate and set nuclear power prices, the people said.
This includes tenders launched this month for 10 and 15-year power contracts aimed at third-party electricity providers such as TotalEnergies and Engie which sell EDF’s production on, a new long-term format that did not previously exist.
A French official said the government was not convinced by Rémont’s proposals because they considered them unworkable and unrealistic, and might not pass muster in Brussels with regulators which probe whether or not EDF is in line with competition and state-aid rules.
The official played down the tensions with EDF, however, saying that ultimately both sides wanted a solution.
“Our interests are aligned now that the state owns 100 per cent of the company,” the person said. “If EDF loses money, then we lose money.”
People close to EDF acknowledge the differences in Rémont’s position and that of the state but have also played down the tensions, noting exchanges were not hostile.
EDF and the energy ministry declined to comment.
Source: Financial Times
